Seminis Inc. today announced a global restructuring and optimization plan, which will reduce operating expenses by as much as $136 million and increase pre-tax earnings per share by $2.27 over the next five years (before inventory write-offs). The restructuring cost, comprised primarily of headcount reduction, along with inventory write-offs will result in a pre-tax charge to fiscal
2000 results of $36.0 million or $0.61 per share.

The company said the cash flow benefit from the restructuring and optimization plan is expected to total approximately $191 million in the five-year period, with $100 million derived from cost savings, $40 million from reductions in working capital and $51 million from net asset sales. To fully realize the potential cost savings, the company anticipates an additional estimated $18 million of related costs over the next two years as later elements of the overall plan are initiated.

Seminis said the savings derived from the restructuring and optimization plan, upon full implementation, would imply a pro-forma EBITDA margin to sales of 26% against a 17% achieved in 1999's actual results.

Savia, the majority owner recently invested $42 million into Seminis to support the company's cash needs. In addition, the company has received approval for an amendment with its bank lending group in support of the company's actions; the parties are in the process of executing final documentation to the company's $350 million credit agreement.

The key elements of the Seminis global restructuring and optimization plan involve: 

• Reorganizing its 10 legacy seed companies into four geographic regions, thus eliminating multiple subsidiaries and decision-making and creating a more agile and efficient organization
• Canceling $35 million in planned plantings in calendar year 2000 with a reduction of $40 million in inventory for fiscal 2001
• Reducing operation and production facilities from 21 to 6, with a corresponding reduction in headcount
• Rationalizing the product portfolio by eliminating approximately 2,000 products (which represent 25% of Seminis' product mix), thus concentrating sales in the most profitable ones
• Implementing an advanced global logistics management information system that provides a live mechanism for decision making based on inventory levels, incoming crops and projected demand for seeds
• Divesting non-operating and non-strategic assets.

Alejandro Rodriguez-Graue, President and COO said, "These measures and their cost impact in the short term are critical to unlock the potential growth and profitability of Seminis in the medium and long term. The new forecasting methodology, for instance, is already delivering significant value. It has provided forecasts that have enabled Seminis to reduce seed production related to winter crops for $5 million and summer crops for $30 million, with a corresponding impact on cash flow.''

The total cost of the global restructuring plan will reach $36 million, which will be accounted for in the financial results for the fiscal 2000-2002 periods. Beginning in fiscal 2001, the company said, the benefits are estimated to reach $20 million in cost savings and they will reach their highest level of at least $44 million beginning in 2004.

In addition to these measures Seminis will write-off obsolete inventories totaling $18.4 million in fiscal 2000, of which $7.7 million were registered on the second quarter of fiscal 2000 and the balance will be reflected on the third quarter. Low quality seed was destroyed to prevent it from being moved to Oxnard's warehouse. The new facility is now fully climate controlled and built to improve seed storage and handling conditions.

In June 2000, Seminis sold the assets of MBS, Inc., a U.S. subsidiary in the soybean seed business, for $11.9 million as part of a strategy to divest non-core and non-operating assets. Seminis expects an additional net divestiture of assets in the next three years of approximately $39 million by selling some facilities as a result of the global restructuring and optimization plan, as well as the divestiture of non-operating and non-strategic assets acquired as part of strategic transactions in the past. Proceeds will be utilized for capital expenditures and debt reductions.

Specifically, over the five-year period, the company expects the restructuring and optimization initiative to have the following impact: 

Global Restructuring and Optimization Plan
Estimated Impact on Income Statement

Dollars in Millions

Seminis is the largest developer, producer and marketer of vegetable seeds in the world. The company uses seeds as the delivery vehicle for innovative agricultural technology. Its products are designed to reduce the need for agricultural chemicals, increase crop yield, reduce spoilage, offer longer shelf life, create better tasting foods and foods with better nutritional content. Seminis has established a worldwide presence and global distribution network that spans 120 countries with 70 research stations in 19 countries and production sites in 32 countries. Seminis is a majority owned subsidiary of Savia, a Mexico-based conglomerate with leadership positions in financial services, packaging and fresh foods.

Company news release
N2778